On August 4, 2020, CMS released the proposed ruling for two reporting programs of vital interest to ASCs: the 2021 Hospital Outpatient Prospective Payment System (OPPS) and the Ambulatory Surgical Center (ASC) Payment System and Quality Reporting Programs. As part of this ruling, CMS has proposed adding 11 procedures to the ASC covered procedures list (CPL), including total hip arthroplasty (THA) (CPT code 27130).
When a CPT code is removed from the inpatient only (IPO) list, historical trends have shown that it takes two years for that procedure to be added to the ASC CPL. First, the code is approved for the HOPD list before it is approved and added to the ASC list. For example, total knee arthroplasty (TKA) (CPT 27447) was removed from the IPO list in 2018 and added to the ASC CPL in 2020.
In contrast, THA is now being considered for the ASC CPL only one year after being removed from the IPO list and added to the HOPD list (in 2019). The reduced timeline for the procedure to be approved to the ASC CPL by CMS enables acceleration of surgery migration.
Factors Influencing Total Joint Migration
The number of THA and TKA cases is projected to increase from 1.1 million to approximately 1.9 million by 2026, and 51% of primary hip and knee replacements are expected to be performed in the outpatient setting. Many factors have contributed to the migration of joint replacement cases out of the hospital setting:
- Both CMS (for Medicare beneficiaries) and commercial payers have historically pushed for the use of ASCs as an alternative, lower-cost site of care.
- Adding procedures to the ASC CPL creates an opportunity for more efficient use of healthcare resources and infrastructure—which has been accelerated by the COVID-19 pandemic. It is expected that patients who can safely be treated in ASC settings will be diverted away from hospitals in increasing numbers, and hospital capacity will be reserved to treat more acute patients.
- Improved patient selection protocols have been developed.
- Younger patients are undergoing THA and TKA procedures.
- Surgical techniques and pain control measures have advanced.
- Growing research shows the safety and efficacy of same-day discharge joint replacement.
Key Considerations
Many (if not most) organizations could see material implications from the CMS proposed 2021 rule to add THA to the Medicare ASC CPL; however, the true impact of these changes will vary for each state, facility, and service line structure, based on some of the considerations we discuss below.
Revenue
CMS has proposed payment for THA at $8,923.98 in the ASC and $12,558.56 in the HOPD. CPT 27130 (THA) is proposed as a “device-intensive” code under OPPS—identified with payment indicator J8 and designated by CMS as having adjusted pricing attributable to implant cost. No additional implant payment would be made by Medicare to ASCs beyond the proposed rate of $8,923.98, which is based on the national unadjusted payment rate.
Implant Reimbursement
THA implant costs vary (based on ECG’s experience) by brand, physician preference, and the clinical indications of the patient, and are impacted by the ASC’s contractual relationship with its implant vendor. The ability of an ASC and its physician leadership to successfully manage implant costs will determine whether that ASC will find it financially viable to perform THAs. For example, in the 2021 proposed rule, the device offset amount allocated to CPT 27130 is $6,040.99, which is attributed to the implant cost allocated for the case. The remaining portion, $2,882.99, is allocated for the procedure. This does not provide significant dollars for an ASC to do the Medicare case—in fact, the implant may cost the ASC more than the total reimbursement amount. This device offset value attributed to the implant is based on hospital reporting data; ASCs may not have the buying power of a hospital due to smaller purchasing volumes.
It is imperative that centers not already doing case costing start doing so to determine the rate targets needed with commercial payers, assess their payer contracts, and evaluate whether their rates are adequate to cover the costs associated with THAs. If the CMS rule is passed in 2021, case costing can determine whether there will be losses on Medicare cases.Managed Care Contracting
Many commercial payers use the Medicare ASC fee schedule as a guide for establishing their own reimbursement rates. ASCs, whose existing commercial payer contract reimbursement rates do not already include reimbursement for THAs, may use the Medicare rates as a benchmark to establish and negotiate rates. Therefore, an ASC must conduct case cost analyses across all surgeons and factor in not only the direct operating cost and variances that may exist, especially with implant types, but also any capital expenditures that have been or will be incurred. If losses are realized with Medicare and government payers, this should also be factored into rate targets with commercial payers, and it is important to be able to schedule all cases in a day, regardless of the payer class.
Extended Recovery Care and State Regulations
Many states allow for extended recovery care that may range from 24 to 72 hours (e.g., Florida, Colorado, New Hampshire, Nevada, Oregon). ASCs will need to navigate their individual state regulations to determine whether extended recovery care is an option and be aware of specific time parameters.
Construction, Capacity, and Capabilities
ASCs that are not already performing THAs should evaluate whether they have the resources (space, equipment, trained staff) to add total joints. A list of key tasks includes the following:
- Ensure there is ample storage for additional equipment and supplies to support a total joint program.
- Assess the capital requirements for purchasing equipment that may be needed to establish a total joint program in the ASC.
- Work with surgeons to establish protocols, create patient selection criteria, and provide patient education.
- Engage staff from the start to make them feel part of the process.
- Evaluate staff expertise, identify gaps that may need to be filled, and provide education and training as appropriate.
COVID-19
During the early months of the COVID-19 pandemic, patients had become reluctant to go to the hospital for elective procedures because they feared increased risk of exposure. As a result, some ASCs have now reported an upswing in total joint replacements after reopening to surgery cases. ASC Quality Collaboration conducted a survey to learn the impact of the virus on centers and their patients. According to 710 respondents, over 84,000 procedures were performed—all on noninfected patients—and very few centers reported infections related to COVID-19 within 14 days after surgery. ASCs have less facility traffic and have implemented stringent prescreening protocols for patients prior to surgery as well as for their physicians and staff. ASCs have demonstrated they are a safe site of service and are following the same patient safety and infection control guidelines as hospitals.
A Glimpse of the Future: Elimination of the IPO List?
In the 2021 OPPS proposed rule, CMS has asked for comments on removing all codes from the IPO list over a three-year period, with a complete elimination of the list by 2024. This provides opportunity for surgeries to be performed in the HOPD setting. However, it potentially presents limitations for additional total joint procedures to be added to the ASC list due to another CMS rule provision—one that proposes to modify criteria allowing codes to be approved on the ASC CPL to exclude procedures designated as requiring inpatient care under 419.22(n) as of December 31, 2020. Thus, the opportunity for additional cases to be added to the ASC PL list may require some additional rule modifications if this provision, under 419.22(n) in the proposed rule, is passed without change.
Published October 26, 2020